Is Bernanke Secretly Still Conducting Monetary Policy?

There have been news reports the past few days about how former Chairman of the U.S. Federal Reserve Bank Ben Bernanke has been going around giving speeches in private to hedge funders and getting paid gobs of money.

Obviously a lot of the focus has been on the fact that Bernanke is getting paid more per speech than his annual salary as head of the Federal Reserve.

But a chart sent out to clients this morning from Deutsche Bank's Torsten Slok sheds a different angle on what's going on.

The chart shows, essentially, that for the past several years, interest rates have been entirely driven by Fed communications. Rates fall when it looks as if the Fed will stay low for a long time. Rates rise when the Fed hints that a rate hike might come sooner.

Deutsche Bank What's really interesting, though, is the final arrow in the chart: "Bernanke dinner talk."

One of the things Bernanke has been saying, reportedly, is that we'll be in a low-rate environment for an extremely long time. And alas, rates have been falling again.

If the primary mechanism of the Fed is communication — and it is, since interest rates are at zero and they can't be cut further — and Bernanke's communications are still influencing the market, then it stands to reason that we have something of a shadow Fed chair, who's still conducting monetary policy in secret meetings with wealthy investors.